Boyd Gaming Stock Primed for a Bullish Options Trade

Bouncing BYD is still heavily shorted

May 22, 2018 at 10:34 AM
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Shares of casino concern Boyd Gaming Corporation (NYSE:BYD) recently broke above a trendline connecting their highs from February to April, and last Friday moved back above their pre-earnings and earnings-day closes. When BYD has retaken these levels in the past, the stock has rallied. What’s more, the Supreme Court's recent decision to legalize sports betting boosted BYD stock last week, and could have positive fundamental implications. Nevertheless, there is still plenty of pessimism lingering in the background. This negativity could unwind and fuel future gains, making now an opportune time to bet on the casino stock's next leg higher.

Daily Chart of BYD

 

A continued round of short covering could spark bigger tailwinds for BYD. Although short interest is down 25% from its early December peak, there are still 9.59 million shares sold short -- accounting for a week's worth of pent-up buying demand, at the stock's average daily trading volume. There is also a slew of May call options that just expired, lessening the impact of potential options-related resistance.

Lastly, the stock's Schaeffer's Volatility Index (SVI) of 28% is in the 29th annual percentile, indicating short-term options are pricing in relatively low volatility expectations at the moment. Also, our recommended call option has a leverage ratio of 6.1, and will reach its 100% profit target on a 16.1% rise in the underlying security.

Subscribers to Schaeffer's Weekend Trader Series options recommendation service received this BYD commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

 

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